DOJ Opinion No. 017, s. 1980

DOJ OPINION NO. 017 , s. 1980 February 4, 1980 Asian Development Bank Roxas Boulevard Manila Gentlemen: This has reference to the Loan Agreement (Loan No. 412 PHI [Manila Port Project], dated November 7, 1979, between the Republic of the Philippines (Borrower) and the Asian Development Bank (ADB), whereby the latter agreed to lend the former an amount in various currencies equivalent to $27 Million (Sec. 2.01, Art. II, Loan Agreement), the proceeds of which will be relent to the Philippine Ports Authority (PPA) under a Subsidiary Loan Agreement executed between the Borrower and the PPA (Sec. 3.01[a], Art. III, Loan Agreement). The proceeds of the loan shall be used for the financing of expenditures on the Project described in Schedule I of said Agreement (Sec. 3,01[b], Art. III, Loan Agreement). In accordance with Section 9.02, Article IX of the ADB Ordinary Operation Loan Regulations, dated February 17, 1977, which is expressly incorporated in the Loan Agreement aforementioned (Sec. 1.01, Art. I, Loan Agreement), opinion is requested showing on behalf of the Borrower, that the Loan Agreement has been duly authorized or ratified by, and execute and delivered on behalf of, the Borrower and is legal and binding upon the Borrower in accordance with its terms. Furthermore, pursuant to Section 6.02, Article VI of the said Agreement, an additional matter is specified to be included in such opinion, namely, "that the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and (the) PPA and is legally binding upon the parties thereto in accordance with its terms, subject only to effectiveness of (the Loam Agreement)". Validity and Binding Effect of the Loan Agreement The statutory authority for the Republic of the Philippines to contract such a loan is found in Section 1(B) of Republic Act No. 4860, as amended, and which, insofar as pertinent, provides: "SECTION 1. The President of the Philippines is hereby authorized in behalf of the Republic of the Philippines, to contract such loans, credits, including supplier's credit, deferred payment arrangements, and to enter into and conclude bilateral agreements involving other forms of official assistance such as grants and commodity credit arrangements or indebtedness as may be necessary and upon such terms and conditions as may be agreed upon, not inconsistent with this Act, with Government of foreign countries with whom the Philippines has diplomatic or trade relations or which are members of the United Nations, their agencies, instrumentalities or financial institutions mentalities or financial institution or with reputable international organizations or non-governmental national or international lending institutions or firms extending supplier's credit or deferred payment arrangements to enable the government of the Republic of the Philippines to: LexLib xxx xxx xxx "(B) Lend the proceeds of such loans, credits or indebtedness to government-owned or controlled corporations to finance development projects which are authorized by the charters of such corporations or by law: Provided, That the proceeds of said loans, credits or indebtedness shall likewise or used to meet the direct and indirect foreign exchange requirements and peso costs of the project, including studies, technical surveys, equipment, machineries, supplies, construction, installation and related technical services." While the President of the Philippines is the official authorized under the foregoing provision of law to contract, on behalf of the Republic of the Philippines, foreign loans, credits and indebtedness for the purposes indicated therein, he may designate a representative and clothe him with the authority to do the formal act of signing the agreement. (See Ops., Secretary of Justice, dated Nov. 22, 1966, May 26, 1969, Feb. 22, 1972, Aug. 2, 1974, May 26, 1976 and March 22, 1978). This was done in the instant case when, on August 16, 1979, he designated the Honorable Cesar Virata, Minister of Finance, "to sign such Agreement and other documents related thereto, with the Asian Development Bank", pertaining to "a loan of approximately TWENTY-SEVEN MILLION U.S. DOLLARS (US$27,000,000) or its equivalent in other currencies to finance the Manila Port Project" and invested the latter with full power and authority for that purpose, (Annex "A") Thus, the signature of Minister Virata on the Loan Agreement is in pursuance of the authority duly conferred upon him by the President of the Philippines. As previously stated, the proceeds of the instant loan are intended for the financing of the Manila Port Project, a project which is approved for financing by the National Economic and Development Authority (Annex "B") and likewise approved by the President of the Philippines, as can be deduced from his grant of authority to Minister Virata to sign the instant Loan Agreement. (See Annex "A", supra ) Compliance with the ceiling requirement provided in Section 2 of Republic Act No. 4860, as amended supra , is shown by the certification of the Minister of Finance, dated November 22, 1979, that the herein loan "is within the ceiling of Five Billion United States Dollars (or its equivalent in other foreign currencies) direct loans, credits or indebtedness which the President (of the Philippines) is authorized to incur under Section 2 of R.A. 4860, as amended". (Annex "C") And the condition imposed in the same section that the loans, credits or indebtedness should be incurred "at terms of payment of not less than 10 years" is satisfied, considering that the principal amount of the loan shall be repaid within a period of 19 years. (See Schedule 2, Amortization Schedule, Loan Agreement) Validity and Binding Effect of the Subsidiary Loan Agreement The legal authority of the Republic of the Philippines and the PPA to enter into the Subsidiary Loan Agreement, dated November 7, 1979, is found in the abovequoted Section 1(B) of Republic of Republic Act No. 4860, as amended which expressly authorizes the Republic of the Philippines to "lend the proceeds of such loans, credits or indebtedness to government-owned or controlled corporations to finance development projects which are authorized by the charters of such corporation or by law". Pursuant to the provisions of Presidential Decree No. 1284, the PPA is empowered to undertake the Projects to be financed under the Agreement and it is a qualified borrower under the aforementioned action of R.A. 4860, as amended, it being a government-owned corporation. Moreover, it is vested by its charter with express authority to borrow funds "either for local or international sources" (Sec. 13, P.D. No. 857) in furtherance of "the policy of the State to implement an integrated program for the planning, development, financing and operation of ports or port districts for the entire country". (Sec. 2, Id .) As regards the execution and delivery of the Subsidiary Loan Agreement, on the Part of the Republic of the Philippines, the Minister of Finance of the Borrower, by Section 8.01, Article VIII of the Loan Agreement, is designated as representative of the Borrower for purposes of Section 11.02 of the ADB Ordinary Operations Loan Regulations, one of the purposes of which is to execute any document required or permitted to be executed under the Loan Agreement, on behalf of the Borrower. The Subsidiary Loan Agreement is such document required to be executed under Section 3.01, Article III of the Loan Agreement. And, on the part of the PPA, Resolution No. 270 of the PPA Board of Directors, dated September 7, 1979, resolved "to authorize the General Manager" of the PPA, "to sign on behalf of PPA "the Subsidiary Loan Agreement. (Annex "D") Wherefore, after having closely examined the terms and conditions of the two Agreements discussed hereinabove in the light of pertinent provisions of law, the undersigned is of the opinion that (a) the Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Republic of the Philippines and is legally binding upon the Republic of the Philippines in accordance with its terms; and (b) the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Republic of the Philippines and the PPA and is legally binding upon the Republic of the Philippines and the PPA in accordance with its terms. Very truly yours, (SGD.) RICARDO C. PUNO Minister of Justice